As part of the year-end audit and using the analytical-procedure approach similar to last year’s audit (average loan volume multiplied by weighted-average interest rate), determine if Northwest Bank’s interest income from loans reported at December 31, 2018 appears fairly stated. Do the results of the analytical procedure indicate that you accept 2018 interest income as reported?
Yes ________ No ________ Please briefly explain your answer.
Yes, using last year’s approach, loan interest income appears fairly stated because the difference ($154,000)
is less than materiality ($525,000)
Students may be interested to know the responses from 20 practicing auditors completing a similar case.
For question 1 all auditors accepted the balance as fairly stated.
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What will be an ideal response?
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